Saturday, June 02, 2012


From the New York Times, Nobel Prize winning economist Paul Krugman:

The Austerity Agenda

The bad metaphor — which you’ve surely heard many times — equates the debt problems of a national economy with the debt problems of an individual family. A family that has run up too much debt, the story goes, must tighten its belt. So if Britain, as a whole, has run up too much debt — which it has, although it’s mostly private rather than public debt — shouldn’t it do the same? What’s wrong with this comparison?

The answer is that an economy is not like an indebted family. Our debt is mostly money we owe to each other; even more important, our income mostly comes from selling things to each other. Your spending is my income, and my spending is your income.

So what happens if everyone simultaneously slashes spending in an attempt to pay down debt? The answer is that everyone’s income falls — my income falls because you’re spending less, and your income falls because I’m spending less. And, as our incomes plunge, our debt problem gets worse, not better.


For when you push “austerians” on the badness of their metaphor, they almost always retreat to assertions along the lines of: “But it’s essential that we shrink the size of the state.”

Now, these assertions often go along with claims that the economic crisis itself demonstrates the need to shrink government. But that’s manifestly not true. Look at the countries in Europe that have weathered the storm best, and near the top of the list you’ll find big-government nations like Sweden and Austria.

More here.

Certainly, many, many among the austerity crowd are just straight up lying: I mean, Obama essentially called their bluff during the debt ceiling negotiations last summer when he offered several liberal sacred cows in return for tax hikes on the rich; the GOP, of course, refused the deal of a lifetime because they don't really care about the deficit--they want to cut liberal programs simply because they want to fuck the poor, not because they're worried about the debt.

That's outrageous enough, but what really worries me are the average ordinary Americans who buy this bullshit. And I'm not talking about the majority of Americans who are largely apolitical and do not vote. Rather, I'm talking about intelligent people who honestly care about the fate of the nation, people who vote in every election they can, people who read the paper every day and try to stay informed. As far as I can tell Krugman is essentially the only voice in the MSM supporting the Keynesian point of view: pretty much everyone else is all about fixing the deficit as soon as possible because "there is no alternative." And that's the kind of crap the people I'm talking about are spoon-fed all the time.

I got into a conversation about all this with a coworker who fits precisely the description I give in the paragraph above. He was lamenting how in order to fix all the financial mess that we have to cut way back, to "reset" the economy, he said. I told him how that was all bullshit and started trying to talk Keynes, but a bar is just not a good place for such a discussion, and I had difficulty getting him to conceptualize outside of the conventional wisdom. At the very least, I managed to get across, to an extent, that the CW might be wrong when I asked him to explain how a "reset" would actually work--he didn't get very far before he gave up, admitting that he didn't really know what he was talking about.

So that's the reality for these people who are genuinely trying to understand what's best for our economy: they don't really know economics that well, and necessarily defer to the "experts" they read in the papers. Of course, all these "experts" are just so much cattle in how they push the austerity line, not really knowing what they're talking about themselves, but push they do, much to the detriment of the body politic.

No, they're not really idiots, not the conscientious citizens I'm talking about. Just radically misinformed. And that makes me sad if I think about it too much.